Hundreds of thousands of Israelis took to the streets on Saturday night in Israel's biggest ever demonstration to demand social justice, a lower cost of living and a clear government response to the concerns of an increasingly squeezed middle class.

About 430,000 people took part in marches and rallies across the country, according to police. The biggest march was in Tel Aviv, where up to 300,000 took part. There was an unprecedented 50,000-strong protest in Jerusalem, and 40,000 marched in Haifa. There were smaller protests in dozens of other towns and cities.

It had been billed as the "march of the million" but organisers said a turnout matching the 300,000-strong demonstrations four weeks ago would be a triumph. Israel's population is 7.7 million.

Saturday's demonstrations followed 50 days of protests that have rattled political leaders and led commentators and analysts to ask whether a new social movement would transform Israeli domestic politics for the next generation.

The movement, which has the support of about 90% of the population according to opinion polls, began when a small group of activists erected tents in Tel Aviv's prosperous Rothschild Boulevard in protest at high rents and house prices.

Tent cities mushroomed across the country and protesters rallied behind the slogan: "The people demand social justice." Among the issues raised were the cost of housing, transport, childcare, food and fuel; the low salaries paid to many professionals, including doctors and teachers; tax reform; and welfare payments. The government established a committee led by the economics professor Manuel Trajtenberg to examine the protesters' demands, which is due to report later this month.

Demonstrators in Tel Aviv on Saturday night blew whistles and banged drums as they marched in a carnival atmosphere to a large square for a rally. Residents hung banners from balconies and cheered as they passed.

"We are the new Israelis," the student leader Itzik Shmuli told the rally. "And the new Israelis want only one simple thing: to live with dignity in this country."

He added: "Tonight we make history again. The people are supporting a protest started by the young people and, a week after the protest was proclaimed over, we are on the verge of breaking another record. From now on the government knows that at any given moment Israelis can return to the streets and must therefore deliver the goods."

Daphni Leef, one of the organisers of the original tent protest, said: "This summer is the great summer of the new Israeli hope born of despair, alienation and impossible gaps … The Israeli society has reached its red line, and has gotten up and said: 'No more.' This is the miracle of the summer of 2011."

Under a homemade banner saying "Walk like an Egyptian", Ruti Hertz, 34, a journalist, said that until this summer people had been privately ashamed of their inability to make ends meet. "Each person was lonely in their situation, thinking it's my own problem." That had changed with the protests.

She said that she and her teacher husband, Roi, were living on the same income as when they met 10 years ago. "We don't ask for much, just to be able to finish the month without taking from our parents."

Roi's monthly take-home pay of 5,500 shekels (£940) went on nursery fees for their two young daughters, she said.

Vered Cohen Nitsan, a primary school teacher from Netanya, said she had joined the march "to protest, to support the people of my country and [because] I wish my children will have an easier life in the future".

She added: "For years, you think you just have to work harder and struggle. And now people start to talk to one another and you see it's not your personal problem."

At a rally in Haifa, Shahin Nasser, an Israeli-Arab, said: "Today we are changing the rules of the game. No more coexistence based on hummus and fava beans. What is happening here is true coexistence, when Arabs and Jews march together shoulder to shoulder calling for social justice and peace. We've had it."

The protests have been criticised by some on the left for not paying more attention to the discrimination suffered by Israeli-Arabs, who make up 20% of Israel's population, or Israel's occupation of the Palestinian territories.

Weekly demonstrations, whose turnout had been steadily building, were suspended for two weeks after an attack by militants near the Egyptian-Israeli border in which eight Israelis were killed. Some commentators suggested that the movement had lost its momentum.

Protest organisers said the tent cities would be dismantled but the movement would continue with other actions. Many tent-dwellers had already left as the Israeli summer holidays ended.